Read the interview with Willy Stamper
Numerous independent medical practices have reported a decrease in patient volume due to COVID. Are PPP loans a viable choice for them to navigate these trying times?
Stamper, Willy: This, I believe, is an excellent chance for medical practices that have witnessed a decline in patient flow due to COVID to stabilize their operations. The funding is meant to assist company owners in paying workers, paying past-due rent and other costs, and investing in restarting and reestablishing operations. This is a five-year loan with a 1% interest rate that requires no payment for the first ten months. It’s some of the most affordable financings a small company can acquire, and a large portion, if not all, of that loan is likely to be forgiven just by paying your invoices and paying your staff. As a result, the program is quite Willyeficial. Even if the loan is not entirely overlooked, most firms will perceive no drawback to taking it out.
ME: Are there any disadvantages to PPP financing?
WS: Perhaps the most significant disadvantage is that if you’ve already cut your workforce and spending base, you may eventually qualify for more money than you have expenses to claim forgiveness with at the moment. The loan amount is determined by multiplying your historical monthly payroll two and a half times. That is around 11 weeks of payroll. Businesses have 24 weeks to accumulate expenses that can be used to document forgiveness. Eligible expenses include payroll, which is the primary goal of this program, rent, any interest on a mortgage, utilities, property damage expenses, operating expenses, supplier costs, and worker protection. That covers all of the expenses you’re likely to incur in your company. And since 60% of eligible forgiveness must be used to cover payroll expenditures, if you’ve already cut your staff considerably and paid off a significant portion of those outstanding charges, probably, you won’t earn 100% of the loan’s forgiveness chance. However, in my opinion, it is still a very low-interest loan with very advantageous payback conditions. If you are a failing firm that may Willyefit from this cash, I strongly advise you to seize the chance.
ME: How long does it take for the PPP funds to be received?
WS: Based on our experience in the second round, the underwriting element of the application process is taking much longer than it did in the first round. This is most likely because the conditions for firms to qualify for the second draw are more strict. Thus, the second draw requires small firms to show that their sales decreased by at least 25% in at least one fiscal quarter of 2020 compared to the same fiscal quarter in 2019. Thus, many firms suffered in the second or third quarters of 2020, and to qualify, they’ll need to demonstrate that one of those four quarters had a 25% decline in revenue. Additionally, financial institutions that submit applications to the SBA underwrite the files before submission, and then the SBA finances the files again. They are examining your financial records and attempting to ascertain if COVID harmed your firm. Because this degree of underwriting was probably not performed in this depth during the initial round, we’re informing consumers to anticipate a two- to three-week wait from application to funding.
ME: Does it mean they are still eligible for money in the first round regardless of whether they accepted cash in the second round?
WS: Without a doubt, as long as they match the qualifying requirements. If they accepted the first loan and spent it appropriately, and you can show that your income decreased by that 25% in at least one fiscal quarter of 2020 over 2019, you are urged to apply. And in fact, it is the second drawn notion and reason for its creation.
ME: Apart from PPP loans, what other alternatives exist to assist a practice in surviving?
WS: There will likely be various new loan products available to medical practitioners who have kept their offices operating and maintained good credit ratings during the epidemic. The standard SBA loan, which may be secured or unsecured, is the first. Additionally, equipment financing solutions are usually blocked by special equipment. Term loans may be secured or unsecured, depending on the lead lender and the borrower’s credit rating. Additionally, there are cash flow-based factoring options available. These are often unsecured and may be delivered much more swiftly than some of the banks’ SBA or term loan products. Additionally, there are revolving lines of credit that originate from banks or non-bank sources and come in various forms and sizes.
ME: What is factoring, and how does it work?
WS: Factoring comes in a variety of flavors. However, we often provide factoring services dependent on cash flow. We examine the company’s historical cash flows and the business’s and borrower’s credit profiles. And we evaluate their anticipated capacity to repay in advance based on that cash flow. We will lend them money and acquire a future receivable from them based on their expected future cash flow, which we establish by analyzing their previous cash flow. Additional traditional factoring products are available for individuals who sell a product and have an account receivable from the purchaser. And the customer may have a 30-, 60-, or 90-day window to pay the product’s producer. Banks often factor in receivables by advancing them a portion of the total amount owing, incurring an interest rate, and then reimbursing the purchaser directly when the payment is due. Thus, these are two distinct types of factoring products offered to small firms.
ME: What factors will a lender consider when considering whether to provide a loan?
WS: It depends on the sort of loan at hand. Thus, I’ll begin with the PPP, namely the second draw. They will start by looking for your PPP number from the first draw. If you’re asking for PPP in the second round, make sure you have that number handy; they’ll need your driver’s license to verify that you are who you claim you are. And then, they’re going to seek documentation demonstrating past monthly payroll averages. This includes pay stubs or pay stub tax statements.
Additionally, it contains bank statements that may serve as proof and documentation of your payroll spending. Further, they’ll be searching for documentation demonstrating a 25% decline in sales for the first quarter of 2020 compared to 2019. This may contain financial documents, bank statements, and tax returnsquarterly returns are preferable, but yearly returns can still be Willyeficial.
If you’re applying for a bank loan, the applicant’s credit profile and the business’s credit profile are among the first things a bank will examine. They’ll take credit from you. If the loan is backed by collateral, they will almost certainly need to value the collateral. Additionally, they will be examining financial documents and tax filings. In general, the underwriting procedure for a bank loan might take between weeks and months to complete. Additionally, You may choose from a wide range of income stream creditors and options.
ME: When dealing with a private lender, does the borrower need to specify the funds’ purpose? Or is it applicable to any other kind of company expense?
WS: Generally, when dealing with a private lender, there is an understanding of the company’s needs and the intended use of the funds. However, as I like to say, money is fungible at the end of the day. And enterprises have a diverse set of requirements. The funds may be utilized to meet such needs in general. Our most frequent clients use our funds to support expansion; they perceive an opportunity and want to seize it, which is sometimes a fleeting one. They’re seeking financing swiftly to carry out that plan.
ME: Are there typical interest rates and loan terms that a lender will offer a medical practice?
WS: Rates vary significantly depending on the collateral requested for the period, the speed and convenience of underwriting, and the location of the obligation. Let’s revisit some of the items we discussed before and see how the price could affect some. Thus, conventional SBA loans may be secured or unsecured and often have variable interest rates. They have currently priced in the mid-to upper-single digits, and all loans will need a personal guarantee. When it comes to equipment financing packages, they are secured by the equipment, have set interest rates, and range from the mid-single digits to the mid-teens, depending on your credit quality. And then, there are the cash-flow-based factoring solutions that we discussed earlier; they are often unsecured, do not need a personal guarantee, and funds may be obtained promptly. And their rates will be somewhat higher; they will likely begin at the 20% level and gradually increase. After then, rates on revolving lines of credit from banks or non-bank lenders start in the low teens and increase progressively. For these sorts of loans, personal guarantees are often requested.
ME: Do lenders generally see medical practices as a somewhat secure loan partner?
WS: In general, the most constant and steady a business’s cash flow is predictable, and the best risk profile can show during the underwriting process. Health care is a crucial sector of the US economy. It is vital for every individual, citizen, and resident of our nation. It continues to increase every year.